2025 ESG Regulations in the EU

Written By Kailun Fan

As we approached 2025, new European regulations are reshaping the ESG (Environmental, Social, and Governance) landscape. With the EU taking significant strides toward sustainability, companies must adapt to evolving reporting requirements, decarbonization goals, and supply chain due diligence. In this blog, we will explore key regulations, their impact on IT and media businesses, and how companies can prepare for these changes.

What Are the Key ESG Regulations for 2025?

Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive (CSRD) is the European Union’s enhanced sustainability reporting framework, replacing the Non-Financial Reporting Directive (NFRD). It aims to improve transparency and accountability in corporate environmental, social, and governance (ESG) disclosures. A key requirement is the double materiality principle, meaning companies must report both their impact on sustainability and how sustainability risks affect their business. The CSRD introduces standardized EU Sustainability Reporting Standards (ESRS) to ensure consistency across industries.

The directive applies to large companies that meet at least two out of three criteria: more than 250 employees, over €40 million in turnover, or more than €20 million in total assets. It also covers listed small and medium-sized enterprises (SMEs), though they can opt out until 2028. Additionally, non-EU companies with €150 million revenue in the EU must comply if they have an EU subsidiary meeting the criteria or an EU branch generating over €40 million in revenue.

Key requirements under the CSRD include comprehensive ESG disclosures following ESRS, external assurance of reports (starting with limited and later transitioning to reasonable assurance), and integration of sustainability data into management reports rather than separate documents. Companies must also adopt a digital reporting format (ESEF with XBRL tagging) for improved comparability and accessibility. The directive is being phased in from 2024 to 2026, gradually expanding to more companies over time. Businesses must start preparing now to ensure compliance with the new standards.. 

Corporate Sustainability Due Diligence Directive (CSDDD)

The Corporate Sustainability Due Diligence Directive (CSDDD) introduces mandatory human rights and environmental due diligence requirements for large companies operating in the EU. It requires businesses to identify, prevent, mitigate, and account for adverse impacts in their own operations, subsidiaries, and supply chains. Companies must also adopt a climate transition plan aligned with the Paris Agreement and EU climate goals.

Member States must adopt the directive by July 26, 2026, with phased enforcement. Companies with 5,000+ employees must comply by 2027, those with 3,000+ by 2028, and those with 1,000+ by 2029. National authorities will enforce compliance through fines and injunctive orders, while victims can seek civil liability compensation. The European Commission will oversee implementation to ensure consistency. The CSDDD strengthens corporate accountability, advancing sustainable business practices in the EU.

The CSDDD applies to large EU and non-EU companies that meet specific thresholds. For EU companies, this includes those with at least 1,000 employees and a net worldwide turnover of EUR 450 million. Non-EU companies fall under the directive if they generate at least EUR 450 million net turnover in the EU. In total, approximately 6,000 EU companies and 900 non-EU companies will be affected by the regulation.

To ensure compliance, companies must integrate due diligence into their corporate policies, identify and assess human rights and environmental risks, and implement measures to prevent, mitigate, or remedy adverse impacts. Stakeholder engagement, complaints mechanisms, and regular monitoring are mandatory components. If severe risks cannot be addressed, companies must suspend or terminate business relationships. Reporting must align with the CSRD for transparency.. Additionally, reporting obligations must align with the Corporate Sustainability Reporting Directive (CSRD) to ensure transparency and accountability.

EU Taxonomy

The EU Taxonomy is a classification system designed to define which economic activities are environmentally sustainable. As a key part of the EU’s sustainable finance framework, it aims to direct investments toward activities that contribute to climate neutrality by 2050 and broader environmental goals. The Taxonomy provides a common language for sustainability, helping companies and investors identify truly green activities and avoid greenwashing. It supports the European Green Deal by ensuring financial flows align with sustainability objectives, ultimately fostering a greener economy.

To be considered environmentally sustainable under the Taxonomy, an economic activity must meet four overarching conditions:

  • it must substantially contribute to at least one of six environmental objectives

  • do no significant harm to any other objective

  • comply with minimum social safeguards

  • and meet detailed technical screening criteria.

The six objectives include:

  • climate change mitigation

  • climate change adaptation

  • sustainable use and protection of water and marine resources

  • transition to a circular economy

  • pollution prevention and control

  • and the protection and restoration of biodiversity and ecosystems.

The Taxonomy applies to large companies and financial market participants. Under the Corporate Sustainability Reporting Directive (CSRD), companies must disclose the proportion of their revenues, capital expenditure, and operational expenditure that align with the Taxonomy. Financial institutions and investment funds must also assess and report on how their products align with sustainability criteria under the Sustainable Finance Disclosure Regulation (SFDR). This ensures transparency and consistency in sustainable investment decisions.

The implementation of the EU Taxonomy is phased. The regulation came into force in July 2020, and delegated acts specifying technical screening criteria have been introduced gradually. The most recent amendments expand the list of eligible activities, clarify reporting obligations, and introduce disclosure requirements for gas and nuclear energy under strict conditions. These delegated acts apply from January 2024, ensuring that companies and investors have clear guidelines for assessing sustainability.

By establishing science-based criteria and mandatory reporting requirements, the EU Taxonomy enhances market transparency, supports the scaling of sustainable investment, and reinforces the EU’s leadership in sustainable finance. It ensures that capital flows towards genuinely green economic activities, helping the EU meet its climate and environmental targets efficiently.

Sustainable Finance Disclosure Regulation (SFDR)

The Sustainable Finance Disclosure Regulation (SFDR) is a key part of the EU’s sustainable finance framework, aiming to enhance transparency in financial markets by requiring financial institutions to disclose how they integrate environmental, social, and governance (ESG) factors into their investment decisions. The regulation ensures that investors can make informed decisions about the sustainability of their financial products and prevents greenwashing by holding financial market participants accountable for their claims.

Under the SFDR, financial market participants—including asset managers, insurance firms, pension providers, and investment firms—must disclose sustainability risks that could impact the value of investments and explain how their investments affect the environment and society. These disclosures are required at both the entity and product levels. Companies must publish sustainability-related policies on their websites, include sustainability risk considerations in pre-contractual documents, and report on their impact in periodic disclosures. This framework distinguishes between products that promote environmental or social characteristics and those that actively contribute to sustainability objectives.

The SFDR has been in effect since March 10, 2021, with additional disclosure requirements phased in over time. Since January 1, 2023, financial entities must comply with detailed regulatory technical standards on sustainability indicators, adverse sustainability impacts, and the ‘Do No Significant Harm’ principle. Amendments that took effect on February 20, 2023, require financial institutions to disclose the extent of their exposure to gas- and nuclear-related activities in line with the EU Taxonomy.

The regulation is part of the EU’s broader effort to mobilize private capital for sustainable investments and support the transition to a net-zero economy. By providing a harmonized framework for sustainability disclosures, the SFDR enhances comparability, reliability, and accountability in financial markets, ensuring that investors have access to clear and consistent information on ESG risks and impacts.

How will these regulations impact IT and Media sectors?

1. Decarbonizing IT Operations

  • For IT Companies: The CSRD mandates reporting on carbon emissions, including Scope 3 emissions, which include the entire value chain. IT companies will need to track emissions from manufacturing to end-use consumption. This is particularly important for data centers, which are major energy consumers.

  • For Media Companies: Media companies must also address their environmental footprint, from content production to distribution. With the rise of digital platforms and online content, the industry will need to monitor its energy use and work towards decarbonization goals.

💡 Adopt ESG reporting solutions early to track emissions and ensure compliance with the CSRD. Implement energy-efficient technologies to lower emissions across the value chain.

2. Supply Chain Due Diligence and Transparency

  • Both IT and media companies will be required to enhance transparency in their supply chains under the CSDDD. This includes assessing environmental and social risks and ensuring that suppliers adhere to responsible practices.

3. Avoiding Greenwashing and Enhancing Credibility

With the growing risk of greenwashing, businesses in both sectors must provide accurate and verifiable sustainability data. The CSRD and SFDR are designed to eliminate misleading claims, but companies must ensure that their reports and financial products are transparent and compliant with these regulations.

💡 Engage third-party auditors to verify sustainability claims and ensure the credibility of your reports. Use standardized frameworks like ESRS to align with best practices.

How can IT and Media companies prepare for 2025?

To stay compliant and competitive, IT and media businesses must take proactive steps:

  • Reevaluate Sustainability Strategies: Ensure that your ESG strategies reflect current regulations and market expectations. Adapt your goals and ambitions to the evolving regulatory landscape.

  • Invest in Climate Technologies: Accelerate the development of technologies that reduce your carbon footprint, such as energy-efficient servers or green energy solutions. 🌍

  • Focus on Operational Execution: Ensure that your sustainability efforts are well-executed, from emissions reduction to supply chain management. This includes applying best practices in energy consumption and waste reduction.

The global ESG regulatory landscape

While the EU remains at the forefront of ESG regulations, other regions are rapidly catching up. Here's a brief comparison:

  • United States: The Securities and Exchange Commission (SEC) has introduced climate risk disclosure rules for public companies, but these are not as comprehensive as the EU’s Corporate Sustainability Reporting Directive (CSRD). The SEC is also pushing for broader mandatory climate disclosures for public companies in the future.

  • Asia: ESG regulations in China are primarily focused on green finance, particularly in the renewable energy sector and carbon reduction efforts. Japan’s Corporate Governance Code and Stewardship Code encourage companies to adopt sustainability reporting, promoting responsible business practices and transparency.

Conclusion

As the EU’s ESG regulations continue to evolve, IT and media companies must prioritize compliance, transparency, and decarbonization to stay competitive. By adopting advanced ESG reporting tools, ensuring due diligence in supply chains, and focusing on sustainable practices, businesses can not only avoid regulatory risks but also build a reputation as leaders in sustainability.

Need help getting started? Book a demo with Footprint Intelligence today and discover how our platform can simplify your ESG reporting process and ensure compliance.

⚡️ Watch our product video to see how Footprint Intelligence can help your business stay ahead of the curve in sustainability.

 
Kailun Fan
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